Prime Minister answered questions from TV anchors Irada Zeinalova (Channel One), Sergei Brilyov (Rossiya), Kirill Pozdnyakov (NTV), Yelizaveta Osetinskaya (RBC TV) and Mikhail Fishman (TV Rain).
Sergei Brilyov: Good afternoon. On behalf of the media holding that hosts this broadcast it is my pleasure to welcome you on Rossiya 1, Rossiya 24 TV stations, as well as Vesti FM and Mayk radio stations. We are live with the annual Conversation with Dmitry Medvedev.
Good afternoon, Mr Medvedev.
Dmitry Medvedev: Good afternoon.
Sergei Brilyov: Mr Medvedev, you know all my colleagues present here today. Since I represent the network that is broadcasting today’s interview, I would like to ask the first question, if I may.
The past year was quite challenging, to say the least. The Government prepared an anti-crisis plan. Although it is clear that it has played its role, the question of whether it has been effective is less obvious. Every three months we are hearing that we have reached the bottom, and that the economy has started to grow. This growth then comes to a halt and some new trends emerge. Is the anti-crisis plan working or not? What are your impressions about it?
Dmitry Medvedev: It is true that the situation is challenging. Let me remind you, however, that the last several years were not easy for us either. This is just the way things are internationally and domestically. Speaking about my perspective, I can say that the anti-crisis plan delivered on its objectives. This has helped us weather the most difficult period this year, and this plan has succeeded in nearly all spheres that we identified as being of the utmost importance.
What does this mean? The goal was to stop the decline in production and in the economy as a whole. Based on the data that are available to the Government, I can tell you that the downturn in the economy and production has been stopped, and we believe that growth will resume next year. This is the first thing I wanted to say.
The second is that the key priority of any antirecession plan is to prevent a decline in living standards. Of course, it’s for the people to decide if we have succeeded or not, but I’d like to say that we have implemented very important measures, such as the indexation of the funded component of retirement pensions to equal inflation. As a result, the pensions that our people receive do not lose value due to inflation. This is very important, considering that very few countries approve such indexation measures in conditions that can be described as an economic crisis. But we have done this.
The third thing I’d like to mention, which I consider to be of exceptional importance for the national economy, is, of course, support for our financial system. We can talk as long as we please about taking care of people’s income and about indexing their wages, but nothing good will come of this if the financial system falters and the banking system totters. We have supported our financial system, and our banking system is in functioning properly. I don’t accept recent criticisms. You’ve helped the banks, these people say, but the banks have enough money and other assets as it is. But when banks go down the drain, when they collapse, the entire economy comes to a standstill. Those who remember the 1998 crisis and other difficult periods know this very well.
We have supported our production sectors and the agriculture industry. There are a number of programmes underway. Where did the crisis strike first? It has hit the most vulnerable spots such as the automotive industry. We have invested big money in our automotive industry, so this is why now, despite the downturn… Yes, the sector has declined, although not as much as we feared. The agriculture industry is in good shape. This year’s growth rate will be between 2.5 percent and 3 percent even despite a number of restraints, primarily financial ones. This is why I believe that the antirecession plan has succeeded. It’s a different question whether we should extend it.
Yelizaveta Osetinskaya: Mr Medvedev, next year’s budget looks very optimistic: the price of oil, that’s factored into it, is $10 above the current price, the inflation rate is half what we have now, and growth, instead of decline. Don’t you think that this budget is excessively optimistic? Do you have a plan B and how does the Government intend to deliver on the objectives set forth in this budget?
Dmitry Medvedev: According to the latest estimates, and judging by the forecasts we have to date, I can say…Let me first explain why I said “to date.” What I meant is that the current situation is extremely volatile, as the economists say, which means that there is a lot of uncertainty in terms of economic development. Of course, we have had to update our forecasts more than once. So, according to recent estimates, and judging by the latest forecasts, I think this scenario is quite realistic. We can cut the inflation rate in half, down to 6.4 percent, as we promise in this budget because inflation is already slowing. You know all too well that inflation has almost levelled off in recent months. This is my first point.
My second point is that we can move into a trajectory of tangible, if not solid, economic growth. It is true that there are different perspectives in this respect. The Central Bank has its perspective, which is somewhat less optimistic than that of the Ministry of Economic Development. That said, under the most pessimistic forecasts we’ll have zero growth, while there are also relatively optimistic economic growth projections predicting an increase of up to 1 percent. This is quite good, since, as we know, economic growth rates are sluggish around the world. The European economy is growing at 1.5 percent. This is an average for the EU, and in some member states the economy is actually shrinking. As for our partners, for example a close partner like Brazil has been in a recession for the last 18 months. The Chinese economy has slowed considerably as well, which goes to show that this is a global trend.
For that reason, we believe that in the current environment our scenario is quite realistic. However, not having a plan B, as you said, or even a plan C, if need be, means poor governance. Of course, oil prices are far from gladdening. We discussed this issue recently with you. It’s true that the price of oil is at its lowest point in the last 17 years. I’ll remind you what happened over the last few years. Just a few years ago we were at the peak with oil at $150 per barrel, and now the price is $37-$38 per barrel. I’m talking about Urals, not Brent, which often pops up in various tables and on websites. If you compare these prices with 1998 when oil was at its all-time low of $9 a barrel, I mean an all-time low for Russia, not the Soviet Union, it turns out the purchasing power of the dollar has changed by almost three times. Thus, we could argue that the price of oil is at a 20-year low.
Of course, there is nothing positive about the fact that the Russian economy depends on oil to such a large extent, but we were not the ones who created this structure. This dependency has been shaped over the last 60 years, so it will surely take more than five or ten years to turn things around. So if the need arises, if the times are hard, if we face a worst-case scenario on the oil and gas market, we’ll have to make adjustments. In this respect, the position of the Government will be absolutely realistic.
Mikhail Fishman: Mr Medvedev, since the issue of oil prices has come up, naturally, amid falling budget revenues, the budget as a whole has to be trimmed. However, my question concerns the budget structure, because over the past few years we have been seeing a significant (relative) rise in defenсe spending against the backdrop of social spending cuts, in particular education and healthcare. I’d like you to comment on this. Is this a change of priorities?
Dmitry Medvedev: Mikhail, I take a somewhat different view of this. Indeed, over a certain period we increased defenсe spending. This is so. What’s more, it was done practically five years ago, and I believe that we did the right thing, because by that time, unfortunately, the status of our military hardware, as well as the status of our armed forces as such, was below par. Now we’ve brought this spending up to international levels and our objective is to provide our armed forces with some 70 percent of new weapons and equipment by 2020. Why? Because no one country, not even the smallest country, can sacrifice its defenсe capabilities. Even a very small country in terms of population and territory has to earmark significant resources for defenсe and security. What about our country then? We are the biggest, the largest country in the world, with the longest border. If we do not have effective armed forces we will simply have no country. I believe this to be obvious.
However, I’m saying this now, not to say that we’ve built up security and military spending and that this is our main priority, our overriding priority while everything else is subordinated to it. That would be a one-sided approach. Indeed, this had to be done at some point.
Regarding social spending. Let’s admit it openly and frankly: Over the past 15 years, social spending has been growing rapidly. Yes, there were prerequisites for this: Oil prices rose and we were able to spend more. As a result, we significantly expanded the scope of our social commitments, very much so. Suffice it to recall wages and pensions in the late 1990s, even relative to foreign exchange rates, and today these are totally different figures. And we have not reduced anything. Absolutely nothing! We have not abandoned a single social obligation. So, in this sense, the social budget has been developing practically according to the same scenario as the Defence Ministry’s budget.
You have mentioned certain segments: education and healthcare. Naturally, I realised that you were going to ask me about this. You know, yesterday, I took a closer look at the figures and spoke to my colleagues, other ministers. The budget of the education system – both the federal and consolidated budget – is practically unchanged. It may be changing by one-tenth of the GDP, downward. It’s practically the same. The healthcare budget for next year – both federal and consolidated – is growing. Just a little, also by tenths of the GDP but it is growing, not falling.
Therefore, contrary to existing perceptions, or even some kind of a myth that social spending is declining and military spending is rising, this is not the case. Our social spending is steady, not falling. If we could, we would have increased it, but we can’t do it now. However, I want to reiterate that our priorities remain unchanged with regard to education and healthcare, and spending will remain the same as in 2015.
Kirill Pozdnyakov: Mr Medvedev, I would like to focus on healthcare. On the one hand, we are now doing more high-tech surgeries, which is definitely good news. On the other hand, media are publishing a fairly large amount of information about research institutes, such as the ones operated by the Finance Ministry, working on plans to introduce restrictions on the number of free physical examinations or ambulance calls. All services in excess of an established standard will be provided for a fee. What is this about? Is someone trying to attack the holy of holies, our free medical care?
Dmitry Medvedev: No, no one. Anyone who would try that will get a slap on the wrist or other body parts.
Kirill Pozdnyakov: They’ll have to go...
Dmitry Medvedev: Correct, they’ll have to go see a doctor. Of course, we need to understand how the money is spent, so there must be regulations in place. Free medical services aren’t actually free. They are financed from what is called national wealth, through taxes and deductions, which all individuals and corporations pay. This wealth, this portion of the budget, should be spent properly.
Therefore, we have introduced guaranteed free medical care. It means that everyone is guaranteed to have access to a certain number of medical services. These guarantees must be honoured religiously. Any attempts to cut guaranteed services are unacceptable, and must be addressed by the executive authorities and law enforcement agencies. This is how it must be.
But we must see to it that these guarantees meet today’s requirements. You mentioned high-tech medical treatment. I, of course, can’t help but comment on this. As you may recall, I used to address national high-priority projects including the healthcare project.
What did we accomplish at that time? We initiated normal, free and high-tech surgery using modern equipment for the first time in recent Russian history. Since then, the volume of this type of surgery has increased almost tenfold. By the way, we achieved this over the past seven to eight years. Currently, various kinds of high-tech medical treatments are conducted free of charge, and there are no queues in some areas, although this still isn’t true for all types of treatments. I believe this is a substantial and even dramatic change in the healthcare system because it is one thing to simply pay for medications (people are doing this, one way or another), but it is another thing to pay for extremely expensive high-tech medical treatment. As a rule, the whole world is doing this with the help of compulsory or voluntary medical insurance systems. Naturally, we are still mostly using the compulsory medical insurance system which is performing quite well. Instead of going abroad, many Russian citizens have started undergoing this surgery in Russia because foreign hospitals are more expensive and various other problems. We need to maintain this system no matter what.
Please note that, in his address, the President specially talked about this issue and said that, until the compulsory medical insurance programme’s section on high-tech medical treatment is fully effective (certain directives need to be issued in this area, and certain economic processes initiated), we will be forced to finance this type of surgery straight from the budget. We will simply borrow budget funding and allocate it. I believe this is the best way to guarantee that people will be able to afford medical treatment.
The healthcare system is
facing many challenges. Patients are being forced to pay for services which
should be free. We know about bribery and extortion but it is our common job to
deal with these processes. This is the job of the executive branch, law enforcement
agencies and the patients themselves. They should understand that the more they
give in to these kinds of transactions, the more corrupt the system becomes.
They need to report any implication of paying extra for a simple surgery or any other simple medical service.
Kirill Pozdnyakov: Where should they complain?
Dmitry Medvedev: Where? At a higher-level agency, of course; in this case, a district healthcare department. They must tell them that a certain doctor or outpatient clinic is attempting to commercialise these healthcare services. I assure you, this will help.
Irada Zeinalova: Mr Medvedev, Finance Minister Siluanov said at a Federation Council meeting that next year would be the last time the Government will be able to use the Reserve Fund to cover the budget deficit. Is this alarming news?
Dmitry Medvedev: Yes, we should be alarmed by what Minister Siluanov said, but we are reasonable and sensible people. It is the Finance Ministry’s job to dramatise the situation to make us go cold. I’m saying this openly because only the Finance Ministry can do this. The Finance Ministry is the last ditch, and the Finance Minister, whoever it is, is obliged to dramatise the situation. And this is the right approach.
As for our reserves, let’s ask ourselves: Why have we accumulated them? We have accumulated them for a rainy day like this one, when we’ll be able to spend them rather than sit on them mumbling: “Yes, it’s a difficult situation, but we won’t touch these funds. We’d better tighten our belts more and deny ourselves everything, but we won’t spend our reserves.” What kind of a position is this? No, we will spend our reserves, but in a reasonable way. We know that these reserves will not last forever, but if events take the predicted turn, they will allow us to weather the most difficult economic period. That’s one thing.
Second, the reserves must be replenished at the first possible opportunity, and there have been opportunities like that this year. The rouble rate is highly volatile, and the Central Bank buys foreign currency whenever possible, which amounts to replenishing the reserves. We’ll continue doing this, and hence the task of the Government – a clever government, which is how I see our Government – is to spend the reserves, but on the other hand, to prevent a situation where we go broke. And this is what Mr Siluanov is managing…
Irada Zeinalova: …while at the same time trying to scare us.
Dmitry Medvedev: Yes.
Kirill Pozdnyakov: Is he trying to scare us when he says that one day we’ll have to choose between introducing new taxes and cutting social spending?
Sergei Brilyov: Let’s take a closer look at taxes.
Dmitry Medvedev: First of all, Irada, you’re right. There should be both good and bad guys in the Government. We determined all these roles in advance. There’s no doubt about that. Now, I’m a good guy.
Sergei Brilyov: Oh, can I ask the good guy a question, Mr Medvedev? In particular, about taxes, since the subject has come up. We know how the posh housing and luxury tax stories can end, judging from Mr Depardieu’s case. He has relocated to Russia.
Dmitry Medvedev: He’s not the only one.
Sergei Brilyov: They come here, among other things, because of the 13 percent tax. Now, here is a question, not from the rich but from the middle class, which is, of course, watching the Duma debate with some anxiety, especially from the leftist perspective, regarding the possibility of introducing a progressive tax rate and moving away from 13 percent. What do you think about this?
Dmitry Medvedev: Sergei, do you consider yourself to be a member of the middle class?
Sergei Brilyov: I do.
Dmitry Medvedev: So, what do you think about the introduction of this “progress”?
Sergei Brilyov: You’re putting me in an awkward situation. I’ve never gone to the polls nor do I plan to, but you’re compelling me to give a political answer. I take a bad view of this. I believe that 13 percent should remain.
Dmitry Medvedev: Well, I see. As a matter of fact, yesterday, I also conducted a mini poll among my colleagues, other ministers, realising that we will address this issue at some stage, maybe even including the introduction of progressive taxation. I believe, first, that the 13 percent income tax, which we introduced in 2000, is something that has proven a 100 percent success of ours. Ours – I mean the ruling authority that has been around since 2000: President Putin, the government and other authorities who subsequently dealt with it. This tax has put us into a totally different league. Remember how salaries were paid in the 1990s (everyone here worked during the 1990s and remembers this very well). Money, a significant part of it, was paid in envelopes [=off the books]. When the 13 percent level was introduced the gray sphere practically disappeared and now people pay their taxes (I mean income taxes). It makes more sense to pay than not to pay. Well, then, why kill the goose that lays golden eggs?
Yes, there is a view – many leftist parties adhere to it – that progress is essential. What’s at issue? It’s our society’s readiness for progressive taxation and the readiness of our tax system. After all, progressive taxation has pluses, since it equalises – apparently more fairly – the chances of those who participate in the sharing of the public pie, those who generate tax revenues and those who then use public funds. Well then, the collection of progressive tax revenues involves significantly higher administration costs. We will simply have to force everyone to file declarations, albeit online. Even if your wages are relatively low you will have to file a declaration from each place of employment. This will make things more complicated.
Finally, there are countries where tax evasion is a serious crime. We don’t have this yet, unlike many other countries where not paying your income taxes or some other tax is simply not possible.
So the decision was made (it was endorsed by the President) not to touch the tax system in general and the 13 percent income tax in particular for the next several years.
Lastly, to ensure that those who make more money share their income in some way or the other… After all, why are incomes necessary? It’s rare when a person just sits on his capital and does not invest it in anything. Usually he considers buying a house, a car, etc. . Well, upscale housing and expensive cars are taxed at a higher rate now. So, those who procure expensive housing will contribute a greater part of their income all the same. I believe that today this is the optimal approach. And then we’ll see what happens in five to seven years.
Kirill Pozdnyakov: Maybe we should talk about ways to save money?. I believe many people would like to ask this question, because there are legends that officials, including former ones, enjoy some incredible benefits that cut into the budget, and that spending on the government apparatus, despite claims that it is being cut, is nevertheless rising at the expense of other programmes. Is there anything that can be cut? Is that popular sentiment correct?
Dmitry Medvedev: There are things that can be cut, and that feeling is correct. Indeed, spending on the state apparatus is inflated. The state apparatus is such a thing ... The minute you turn away from it... it tends to expand. It lives by well-known governance laws. As far as I can remember (I’ve been in public service for a long time now), we have on many occasions decided to cut the state apparatus. It's not that we failed to act on our decisions. We did act, but then six or 12 months later, someone starts needing more money. A new task, or a new function always requires more money. Purchasing new equipment or anything like this also involves more spending. As a result, spending is always growing. I believe that any government in any country must make regular decisions on cutting government spending and trimming excess spending.
In addition, we still have traditions that were formed in the Soviet and post-Soviet period. Let's face it, our government officials are accustomed to riding in noticeably more expensive vehicles than do officials in other countries. I don’t think this the proper thing to do. If you make enough money, go ahead and buy yourself a nice private car and enjoy it. However, middle-class, not top-of-the-line, vehicles should be purchased for official use.
We decided to pare down our ministries that are part of the government bloc. The President takes all decisions on the security, defence and law enforcement departments as these departments are related to security, although there are cuts that can be made in these departments as well. So, we have decided to reduce the government bloc by approximately 10 percent starting next year. This is not the first time we will be doing this based on what I just said. We will, of course, see to it that this decision is implemented.
In addition, we will cut an entire line of spending on the state apparatus. More decisions are being made in other areas, including, by the way, in the sphere of civil servants’ pensions and vacations. I pointed this out once during a meeting.
I said that civil servants have longer vacations than other categories of employees, but is our work that much more hazardous? There may be different approaches to this. Our work is complicated, but I wouldn’t say that civil servants should have more time off than any other category of government employees. We decided to cut their vacation time. Perhaps, not all of my fellow public servants agreed with this decision, but this was the right thing to do.
With regard to the regions, there really is a decision to pay all sorts of bonuses and support former top officials from local and regional budgets. This has been left up to the regions to decide. So, I believe that the regional leaders should come clean and tell residents of their respective regions that if they feel that they have quite a prominent region head they should say that they want to provide him or her with life-long support, and let him keep the official vehicle and the country residence. Let the people decide. If they agree to it, let him or her keep their benefits. However, if the people are against it, then such benefits should be cut, because they come from the budget. We will of course provide the regions with the appropriate recommendations. I discussed this issue with our colleagues from the People's Front who engage in providing expert opinions. They’ve been doing this for quite a long time now. I believe that this is absolutely the right thing to do, because we need to set things straight. But I emphasise: this should be done not from Moscow, not by the President or the Government. Let the regional authorities take the liberty and say whether they want to keep or withdraw the benefits. That’s the way to go.
Irada Zeinalova: Yes, hazardous production facilities. Of course, they should decide for themselves. I’m talking about money again. We met last year…
Dmitry Medvedev: Irada, they are always asking me about money.
Irada Zeinalova: But I’m talking about big money. We met last year, and, as you might recall, the dollar broke all records. That situation was very difficult psychologically.
Dmitry Medvedev: That’s true.
Irada Zeinalova: This week, we are also posting some discouraging news. We understand it, this is the end of the year … But one dollar costs about 70 roubles again. Is this the limit? What exchange rate does the Government consider the most appropriate when drafting the budget and for economic development? What can we expect?
Dmitry Medvedev: Irada, you’ve asked the right question, and I’m glad you recalled our conversation of 12 months ago at this same table. Indeed, to be frank, everyone, even members of the Government and, naturally, representatives of the Central Bank, were much more alarmed at that time. Of course, we realised that this process couldn’t last forever, but we still had to see whether we had reached the bottom of the barrel and to evaluate exchange rate limits. Everything has stabilised. Indeed, the rouble has entered an entirely new stage, and we are now using a floating exchange rate. And that’s good because no one is dictating the rouble’s exchange rate. Any control implies that the exchange rate is unrealistic, and an unrealistic rate can crash at anytime. This is what happened during the Soviet and post-Soviet periods. So we‘re using a floating rate of exchange. But there is no hiding the fact that the rouble depends on oil revenue and oil prices to a great extent. I said this a while ago.
It’s true, that I’d like to be able to say that our oil prices have hit bottom. I think this explains the rouble’s sliding exchange rate. And the current exchange rates won’t continue if oil prices rebound. Although forecasts are an unrewarding task, any oil price hikes influence the rouble’s exchange rate, and the people have adapted to this. Therefore, the 2016 budget forecast uses an average exchange rate of about 63 roubles to the dollar. It appears that the rouble will hover around these figures. But obviously, various factors will influence the rouble rate.
I’d like to remind you that, aside from oil prices, major economic powers and the most important financial markets have been closed to us for a long time. Basically we are using our own sources of development. This is both good and bad because we have been forced to assess the value of our own economic potential for the first time. What did we do in the past? I’m talking about the Russian Government of the 1990s and 2000s. When we were in trouble, we took out Western loans. These loans were mostly taken out by commercial institutions, including banks and major corporations. They used these loans to compensate for liquidity shortages, to obtain sources of currency for signing import contracts and so on. This is now history, but we continue to live, and we even continue to develop. True, we are worse off than we would like to be. But, on the other hand, we are learning to understand the internal resources of the Russian economy. Indeed, the Russian economy has proved its self-sufficiency, and this is an established fact. To put it straight, not every country has a self-sufficient economy; some countries are unable to live without foreign assistance. But our country can certainly live and develop even in these conditions, although there is little that’s positive about it.
Mikhail Fishman: This sounds promising, of course, but let me continue on the subject of money. Not without pride, you said that the Government is fulfilling its obligations with regards to the pay-as-you-go component of retirement plans. This is great, but for the second year in a row it has been decided to freeze the accumulative part of the pension. On the one hand, this undermines people’s trust in the very idea of personal retirement savings that the Government obviously committed to. At the same time, the Government has been constantly discussing possibly raising the retirement age. I believe these two issues are connected. There are economists that claim that it is necessary and inevitable. Therefore, I would like to understand what your intentions are with regard to both the accumulative element and the raising of the retirement age. What are you going to do?
Dmitry Medvedev: Here is what I would like to say in response to the first and second parts of your question. There is hardly any connection between the two issues. Speaking about the accumulative part, it is true, for a few years now we have decided to freeze the accumulative element of the pension. Does it affect the interests of the people who are covered by this system? There are different opinions. Let me express the one I believe is absolutely fair. They are not affected because this freeze concerns neither the entire amount of money that people will be paid when they retire nor our current pension obligations. Moreover, we are distributing almost the entire accumulated fund between the current retirees as the pay-as-you-go part and people get paid all they are entitled to. That means they now receive their pension in full and will receive it in the future. This is a compulsory measure, unfortunately, we can’t avoid it. There are two reasons why. First, we had to prepare the pension institutions that manage the respective component of pensions, or the private pension funds, for joining the insurance system so that they would be transparent, open and free of fraud. Unfortunately, there were many incidents of fraud.. The second reason is purely financial. We do need money for development. This is approximately 345 billion roubles that we can spend on current immediate tasks, including anti-crisis measures.
This situation is temporary. I personally told my colleagues in the Government that we decided not to cancel the accumulative component and the current pension system because the pension system must be generally consistent. In the early 2000s we promised that it would consist of two elements and we must keep them. In this respect, there has been no step back.
Now, about the retirement age. This is a more complicated issue. First, there is no firm decision yet. The discussion continues and everyone is well informed about it. The question is when it is reasonable to retire for a specific person and which retirement age serves the interests of the state.
Let me remind you how the pension system was built, including the retirement age. The retirement age was introduced as a concept in 1932. When I was giving a speech at the State Duma, I looked at the statistics and was shocked. The average life expectancy in our country in 1932 was 35 years – due to hunger, civil war and so on, but nevertheless.
So, life expectancy was 35 years then, but the retirement age was set at 55 for women and at 60 for men. It was the lawmakers’ decision. Happily, the situation has improved radically since then, and life expectancy has recently increased a great deal. I see this as our major achievement. It may be less than in Japan or in Scandinavian countries, but still. And our women are doing better than men: their life expectancy is about 76 years, which is seven years longer than eight years ago. Our men live shorter lives, because of their bad habits, but their live expectancy has nevertheless increased from 10 years ago. This is good. And if they take control of their health, their life expectancy will increase to match that of our dear ladies.
This is a major achievement that has been brought about by our efforts in healthcare, by walking away from bad habits and taking up sports, and also by improved medical services. Hence, we can ask ourselves about the appropriate retirement age. But there is no answer to this question. We need to hold additional consultations and talk with experts and the public, because they have different priorities. Here’s an example to illustrate my point. I can tell you this with full knowledge, because I dealt with it personally. It concerns the retirement age for officials. When we only started discussing this idea, everyone thought, for some reason, that officials would be happy to extend their retirement age by five years. Nothing of the sort! Some of them said they would like to work as long as possible, and their decision did not depend on the post they occupy, while others said they would be happy to retire earlier to help bring up grandkids, grow vegetables and in general do more at their dachas, and so on. So, priorities differ. However, we’ve decided to increase the retirement age for officials to 65 years, but do this gradually, in stages. I believe that this gradual approach is a good formula for increasing the retirement age for all Russian citizens.
Mikhail Fishman: What I asked is whether the Government is taking too long to approve this long pending measure?
Dmitry Medvedev: It depends on your point of reference. The proponents of liberal economic views want us to move faster, while conservatives are trying to slow us down. You see, I believe that we shouldn’t move too fast, but on the other hand, we must not lose time either. Of course, had we made the decision by now, there would have been additional support for the budget. But are people ready for this? I’m not sure.
Hence, we should encourage people to survey their priorities in life and decide what they would do when they reach the age of 55 or 60 years: would they continue to work or retire? It was not a coincidence that we recently discussed how to pay pensions to working pensioners.
I’d like to remind you that working pensioners didn’t draw their pensions in the Soviet Union. They had to choose between drawing a pension and working past the retirement age. The choice was based on serious legal and economic arguments. What is a pension? In fact, it is a payment issued for the loss of one’s employment function, or the ability to work. If you haven’t lost your ability to work, then why should you receive a pension? This was the reasoning of our predecessors, who represented left-wing views, by the way. We changed the trend, and now working pensioners receive both their pensions and their wages. The only thing we haven’t done for them this time is to index their pensions, but I believe that we were in the right this time. So, it depends on your point of reference. But I think that we’ll have to take this decision in the next few years, but only after consulting the people.
Sergei Brilyov: Mr Medvedev, please give me a yes-or-no answer; we don’t want to run out of time here. Will current pensioners receive another pension increase next year? Will things take their usual course?
Dmitry Medvedev: Yes, of course.
Sergei Brilyov: This will remain in the plans.
Dmitry Medvedev: Speaking about pensioners, our position is the following: Those who don’t work, naturally, have the right to their pension including indexation. More likely than not, we’ll carry out this indexation in two stages, depending on the economic situation in the country. There is a standard indexation and another indexation is likely subject to our [economic] performance in the first three months [of next year]. This is the position, incidentally, that we’ve defined jointly with United Russia. I think that it’s a fair and appropriate position and it conforms to the economic state of affairs today.
Sergei Brilyov: And it’s immune.
Dmitry Medvedev: As far as working pensioners are concerned, they work and they receive a pension, but their pension is not subject to indexation because they have a job. I think this is also fair, because as long as they find enough strength to work, they don’t need these small sums from indexation so badly.
Yelizaveta Osetinskaya: Mr Medvedev, the people of Crimea are paying something of a high price for being citizens of Russia. The latest events have shown that Crimea is still isolated, and that its social support system, in effect, exists separately from the rest of Russia. When will this situation be dealt with and how? And most importantly, how much will it cost and who will foot the bill?
Dmitry Medvedev: Ms Osetinskaya, I think if we ask the residents of Crimea if they are paying too high a price to be part of Russia, the absolute majority of them will say that they are ready to pay an even higher price as long as they don’t have to return to the madhouse they were in not so long ago.
Yelizaveta Osetinskaya: I think this depends on how you poll them.
Dmitry Medvedev: You know, no matter how you ask, the first reaction will be the same. I’m not talking about manipulation. I mean the average person being asked a simple question. I’ve put these questions to ordinary people, people you meet in the street.
About Crimea's integration – in fact, it is already integrated in the Russian legal and economic realm. This is exactly why we closed the Ministry of Crimea, because we moved on to a different form of government. Crimea is an integral part of the Russian Federation, both in the legal and economic sense. Local residents timely receive their pensions and benefits. The Crimea is now integrated in the Russian legal framework, which, in my opinion, is much more effective than what they had before.
Yet, Crimea remains really vulnerable for two reasons. One is the huge underinvestment of the past, maybe, 20 years, maybe even from the post-war period. Crimea, which was a gem even 100 years ago, failed to develop the way we all wanted it to during the Soviet period. This neglect grew even worse over the last 20 years. Therefore, there are problems, which only worsened due to the well-known position of the Ukrainian leadership. However, no matter what the Ukrainian rulers say, the recent blackout was nothing less than genocide. That was a cruel – even beyond any reason, as people say – thing to do. I mean cutting off public institutions and households from power supplies, – those same people whom the Ukrainian authorities even refer to as “their people” (“Our people live there, so Crimea should be returned to us,” they say). What else can we say? A disgusting and cruel thing to do. But, honestly, we were ready for it. We stocked diesel engines and backup power supply systems, so we prevented a collapse from happening and provided power to the critical institutions such as healthcare centres and social services even during the most difficult period. The first power supply line went back online recently. Soon we will connect the second leg of the first stage, and two more in May. The resulting capacity will be 800 MW. This should solve Crimea’s problems.
But of course, we will not stop here. The plans include building two new power plants by 2018, in Sevastopol and Simferopol. When this happens, the Crimea will stop being an energy deficient region, but will have an energy surplus. So I’d say the overall situation is normal there.
Finally, last but not least: not all of this is about the money. I return to where I began. It is a completely different story, and you are well aware of the enthusiasm with which the Russian people embraced this integration. .
Yelizaveta Osetinskaya: My question was more about the economic aspect. How much does all this cost?
Dmitry Medvedev: As for the financial aspect – it was not cheap. Of course it wasn’t.
I visited Crimea in the previous years, at invitations from Crimean and Ukrainian leaders, so I can say in all sincerity: I wanted out of there as soon as possible. The beautiful land was a mess, and their attitude toward it was no different. It seemed that the Ukrainian leadership never actually treated it as their land, never bothered to invest in it.
What did they do? They bought land there to build fancy houses for themselves but little else. The roads, the power grid and the service sector were not developed properly. It’s not perfect everywhere in our country either, but let’s be honest, services on the Black Sea coast in the Caucasus are much better than in Crimea. So Crimea is really underfunded. We have a big programme for this, and we will certainly do our best to implement it. This programme will cost approximately 700 billion roubles. This is a lot of money for the country, but we will accomplish everything, because Crimea is indeed a part of Russia. Crimea is a favourite resort destination for many of our people, our people live in Crimea. Everything will be funded, and all of the planned projects will be carried out.
Irada Zeinalova: Mr Medvedev, tell us about Ukraine’s $3 billion debt. We need to get this money back. I’m back on money again.
Dmitry Medvedev: Ask me about something positive, why always money?
Irada Zeinalova: Ukraine owes us $3 billion, and as a result we’ll probably have to sue to get this money back. We were offered instalments together with commercial lenders, despite the International Monetary Fund’s admitting that this is sovereign debt. Plus, recently the IMF changed the rules. What are the implications of these changes? Will they ever give our money back and what is this strange process?
Dmitry Medvedev: Irada, people say, hope dies last.
Irada Zeinalova: Along with $3 billion?
Dmitry Medvedev: Yes, hope still dies last. But if you want my opinion, like a lot of people, I have a feeling that they won’t give us the money back because they are crooks. They refuse to return our money and our Western partners not only refuse to help, but they also make it difficult for us.
Let’s be clear, what is this debt? This was a legal loan. Ukrainian officials (the President and the Government) asked Russia to take part in the acquisition of bonds, to provide a bonded loan to solve the economic problems in Ukraine.
It was a request from the Ukrainian Government to the Russian Government. If two governments reach an agreement this is obviously a sovereign loan. This has never been called into question in the IMF’s entire history, in the entire history of international economic relations. And then, all of a sudden… All right, Ukraine’s new leadership, which is trying to evade its previous obligations and follow its own line – may God be their judge − I can at least find an explanation for this. Surprisingly, however, international financial organisations started saying that this is not exactly a sovereign loan. This is utter bull. Evidently, it’s just an absolutely brazen, cynical lie.
It’s a sovereign loan. And if it is a sovereign loan and if this loan is not repaid, that is, if a loan agreement is not fulfilled, what happens then? Payment is overdue or, as they say, is in default, which always has direct and unpleasant consequences for the borrower. What happened? The IMF – even though it is supposed to reflect the position of the absolute majority of states, not only borrowing states but also creditor states – for the first time in its entire history made a decision for purely political reasons that is designed to support the economy of a borrowing country in defiance of the actual circumstances and all existing legal agreements. This seriously erodes trust in IMF decisions. I believe that now there will be a lot of pleas from different borrower states to the IMF to grant them the same terms as Ukraine. How will the IMF possibly refuse them?
All of this stems from the fact that the international financial system is unjustly structured.. We have said this time and again. I personally spoke about this at the G-20 and G-8 summits. The Bretton-Woods Agreement, which played its role many years ago, is not working today. Quotas are not being redistributed and major economies like China do not have what they are entitled to from the IMF. In other words, unless we reform this system in the near future it will lose its credibility.
Now regarding that 3 billion. Of course, we’ll not tolerate this. We’ll go to court. We’ll push for default on the loan and we’ll push for default on all Ukrainian debts. There’s no escaping this.
Irada Zeinalova: Mr Medvedev, it seems there’s too much fuss around figures. They have to pay on the 20th and we’ll go to court, but today Ukrainian Minister of Finance Natalie Jaresko stated that the Ukrainian government was coming under the unprecedented emotional pressure from the Ukrainian people not to repay the debt. What could be our response? After all, there are figures and official ocuments. What’s going on?
Dmitry Medvedev: I don’t know what the Ukrainian finance minister said. The most important thing is that the Ukrainian finance minister should also understand what the Ukrainian people said because, as is known, she has been out of touch with the Ukrainian people, living in quite a different place. I don’t think the Ukrainian people today care about the repayment of this 3 billion. The Ukrainian people are now concerned about getting through this winter. Nobody knows how it will end for Ukraine as a whole. They are obligated to repay the loan. This is our firm position. If the IMF and, incidentally, our partners do not support us here… The president has addressed this issue. I have signed letters. We have urged the EU and the Americans to help ensure the payment of the Ukrainian debt. We are ready to grant them a deferral as long as they pay. What did they tell us? We will not help you in any way and we will not ensure anything, which only means this: They do not believe Ukraine is solvent. They did not provide guarantees for Ukraine, nor allowed first-rate banks to do so; they could have done this for Ukraine, accepting a rescheduling scheme to repay the loan to us within three years. In other words, they washed their hands and said: Let Ukraine swim on its own.
This is a very bad situation. It is compounded by the fact that in addition to this 3 billion, Ukraine is on the verge of becoming an associated member of the EU. They have chosen this path themselves so let them follow it. This is the responsibility of those who made the decisions. These decisions are shared – at least in part – by the Ukrainian people. OK, no problem. However, they should understand that on 1 January the term we set for fine-tuning our economies to harmonise the CIS free trade zone rules with the EU regulations will end. We reached a special three-way agreement – the Europeans, Ukraine and Russia – to complete this adaptation in a year. What has been done? Nothing! Absolutely nothing! This year they kept telling us it was necessary to meet, talk, synchronise positions and discuss wording. No specific issues were addressed: neither sanitation and epidemiological control, nor customs duties, nor legal harmonisation or technical regulations – nothing.
They should understand us. If they have chosen a free trade zone, a different free economic zone, they should understand that the preferences involved in the free trade zone with Russia, that is, zero tariffs, will end, also for understandable reasons. They are purely pragmatic. They are absolutely unrelated to politics.
We don’t know what goods will end up in Ukraine. They can be European goods or goods from third countries, and they would flood into Russia, in line with zero import duties. We would simply swamp our market, and therefore we told them that we would complete this process. We would complete everything on 1 January if we don’t reach an agreement.
What will this mean for Ukraine? It would receive most-favoured nation treatment and would become a country conducting foreign trade operations in line with the most-favoured nation principles. Everything is good here, except the absence of zero duties. These duties would increase by 3−9 percent, depending on specific categories of goods, or by an average of 6 percent. This is serious business, and they should understand this.
As I see it, chances of our reaching an agreement are almost zero. But we’ll persevere in our efforts to try and reach an agreement until late December. We’ll go all the way to the end in order to show that, if we’re in negotiations with someone, well carry on to the end. . If this doesn’t happen, we would stipulate a new trade regime with Ukraine, and we would introduce special sanctions with regard to Ukrainian foods, as we have promised in retaliation for their sanctions. We have not done this yet because we wanted to help them cope with their economic problems and not aggravate the problems they are already facing. But we would be forced to do this if they don’t agree on a free trade zone with us. Therefore Ukraine would face these two circumstances. I believe this issue is very serious and substantial.
Sergei Brilyov: Mr Medvedev, my next question is rather comprehensive. News reports are filled with previously unseen footage of cruise missiles being launched from warships, submarines and Tupolev Tu-160 bombers. The latter have never been used in battle before. I would like to know, how much does all this cost?
Dmitry Medvedev: This is a secret.I can tell you that the use of the Russian armed forces fits completely into the parameters of the Defence Ministry’s budget. They have not requested any increase in defence spending.
Sergei Brilyov: Not even once, this entire time?
Dmitry Medvedev: As it pertains to the situation described by you, no they did not address this issue.
Sergei Brilyov: This is an excellent answer. Please.
Yelizaveta Osetinskaya: Mr Medvedev, it is a fact that counter-sanctions have resulted in higher prices. This year’s inflation was caused, to a certain degree, by these counter-sanctions. Now Russia is about to impose additional restrictions on Turkish imports. The chances are that this initiative will also push prices up, even though this has yet to be seen. Is the Government thinking about a set of measures that would offset these trends or do we simply have to get used to living in a new reality with higher prices, while incomes remain unchanged? This means we are now in very tough spot.
Dmitry Medvedev: Regarding our revenues, there are a number of factors that influence them, such as the situation on foreign markets, including, of course, on the oil market, and our own capability to change. Let’s be honest and admit that oil accounts for 44 percent of budget revenues. Is this a lot? It is. Were these figures higher before? Yes, much higher. Oil used to account for 50, 60 and even 70 percent of the budget revenue. This goes to say that our budget revenue structure is changing for the better. Our aim is to consolidate these trends.
As for the situation with Turkey and its impact on prices, you are right, and I’m not going to contest the fact that counter-sanctions affect prices to a certain extent. But this impact is not fatal… We have started to forget that food price inflation in early 2008 was 13 percent, you can look it up. And in early 2015 it remained at a similar level. This means we have already been there. Back then, there were no sanctions. What I want to say is that…
Yelizaveta Osetinskaya: You mean that this is attributable to crisis developments?
Dmitry Medvedev: Crisis developments… The causes of surging food prices and inflation in general do not boil down to sanctions because we have seen similar developments in 2008 without any bans or embargoes.
Nevertheless, I’m not contesting the obvious fact that sanctions had an impact. However, we responded by fine-tuning the retail sector, finding new suppliers and launching import-substitution mechanisms. In terms of agriculture import substitution is real and yielding results. We heard a lot about empty shelves, but these predictions failed to materialise. The shelves are full; no problems on this front. It is true that prices have gone up, too, albeit to a varying degree: Moscow saw bigger price hikes compared to the regions. All in all, this is an established fact.
As for the Turkish market and imports from that country, you know, these supplies were not very big, to tell you the truth. We tried to predict how it will play out. Experts believe that it will add 0.2 or 0.2-0.5 percentage points to the inflation rate, which is not too much. Moreover, these fluctuations are due to other processes on the food market. For this reason, we don’t expect this to result in surging prices. But the Government must look into what food suppliers are doing, as they are always looking for reasons to jack up prices. We haven’t closed any company so far.
By the way, let me highlight that Russia’s sanctions against Turkey, the tomato ban, as it is now called, has yet to come into force. In fact, these measures will be effective as of 1 January. If there are price increases, they are caused by price-fixing, and the authorities and law enforcement bodies should crack down on such practices. We will monitor these developments and the Anti-Monopoly Service will pay special attention to this issue.
For this reason I don’t expect these initiatives regarding Turkey to result in dramatic shifts.
Kirill Pozdnyakov: I’d like to continue the topic of imports and exports. Which branches failed to meet import substitution expectations, and which produced a pleasant surprise? As for exports, a similar turn may take place regarding Turkey. We are selling raw materials, oil and grain, but someone else is making money on them. And what about our processing industries? What’s the problem?
Dmitry Medvedev: Kirill, you know, I think that even if we did not have such problems, we should have invented them for the sake of changing our economy. These problems are objective, but we became so used to living off of our exports that having a motive for economic reforms was most important. So what branches demonstrated good flexibility and an ability to substitute imports?
First of all, agriculture, no doubt. This is not the result of the past year. To be honest, this is the result of the implementation of a national project followed by the relevant state programme. We managed to replace many food products, and quite often they are of better quality – fresher…
Kirill Pozdnyakov: But not always at affordable prices …
Dmitry Medvedev: At different prices. In some places these products are more expensive, whereas in others they are cheaper. This should not be viewed in black or white. As for the situation in industry, it is of course more complicated. Yet, I’d like to draw your attention to what is taking place in several markets. Take chemical production, for one. Not all indicators are falling here. Our chemical industry grew by 6.5 percent this year, due to the launch of new facilities and the work on the Russian market. We no longer import many chemicals from abroad but produce them in the Russian Federation, and this is why our industry has grown.
Or take the pharmaceutical cluster. It increased by 13 percent this year because Russia put into operation about 20 new pharmaceutical production lines, if I’m correct. Naturally, this is also import substitution, and it is also very important because medicines are a very sensitive issue. We should develop production of all major medicines in order to avoid dependence on foreign supplies. Very often people say that imported medicines are better. This depends on how they feel, but the main thing is that they are more expensive and are purchased for hard currency. This is why prices on important medicines soar in parallel with fluctuations on the currency market. Prices on our medicines do not rise so fast. That is why our task is to produce them, by all means.
We managed to rejuvenate many other industries that stagnated or were idle for a very long time. I’m referring to shipbuilding and propulsion engineering. We have launched a new production line for engines for our new aircraft. Now we have acquired new aircraft. We all know about this. They are new technology, the equipment of the 21st century. So import substitution is taking place. True, it is not happening as quickly as we’d like it to, but no one had any illusions. It is impossible to build an industry on the German or Japanese scale on the basis of the post-Soviet industry in two years. It is probably impossible to do this in two years, but in 10 years we can do it and join the club of the exporters of sophisticated equipment – those that produce machines and mechanisms or what Soviet political economists described as the “production of the means of production for the manufacture of capital goods”.
Yelizaveta Osetinskaya: Mr Medvedev, some other realities of this year. Chartered flights to Turkey have been cancelled and the air link with Egypt has been cut. Earlier, these routes were perceived as leading to just more remote summer destinations. The government says it is going to promote domestic tourism. But will the Krasnodar Territory and Crimea be able to receive all holiday-makers? Will there be enough water and electricity for them? Will they have enough? It’s import substitution, after all.
Dmitry Medvedev: Oh, yes. There is nothing good in that Egyptian and Turkish resorts are now off-limits. It’s neither the Government’s intrigues, nor ill will on the part of the authorities. It’s the security of our citizens. In choosing between security and rest and recreation, the Russian authorities must choose security. It’s clear what happened. It was a terrorist attack. Moreover, judging by the scale of this year’s terrorist attacks, their recurrence on air routes, regrettably, is highly possible. I am referring to a concrete destination, primarily the Middle East. This is why we have approved a decision, an unpleasant one, incidentally, for our friends and partners, and unpleasant for our people, who spent their holidays there. But I believe these two values – life and holiday-making – are simply incommensurate.
As for Turkey, you and I also understand what happened. By the way, we are not applying sanctions in the direct sense of the word. What we do is, in effect, our state’s protective reaction. After our aircraft was destroyed… How did states normally behave in a situation like this in the 20th century? A war started. Because this amounts to a direct attack on a foreign state. Naturally, in our present life, under current circumstances, a war is the worst option. It is for this reason that the decision has been taken not to respond symmetrically to what has been done by the Turks. Of course, they have violated all norms of international law and committed, in effect, an act of aggression against our country. To use an international legal idiom, they have provided a casus belli, to wit, the grounds for the start of military hostilities. The Russian leadership and the president have decided against this. But we had to show to them that they would be brought to account. It is for this reason that these decisions were taken in the interests of our citizens’ security.
Are these decisions of indefinite duration? I hope not. Although no timeframes are indicated in the documents, it’s clear that renouncing this course will largely depend on the Turkish authorities’ position and their ability to ensure security in their territory.
As far as Russian resorts are concerned, they are not as well-adapted to proper rest and recreation as Turkish and even Egyptian resorts. We know this. The domestic tourist industry is in bad shape. It was underdeveloped in the Soviet era. True, certain populated areas and tourist locations have received a powerful impetus for their development in recent years. I am referring to Sochi, Anapa, and Gelendjik. But the scale of tourist services still cannot match what exists in other countries. OK, this is not a tragedy. We can do it and we’ll do it both on the Caucasian Black Sea coast and in Crimea. The situation is even worse in Crimea because (as we’ve just said) even all of their hotel stars are fakes. OK, we’ll introduce modern tourist standards and make investments. We’ll try to substitute.
And lastly: It’s not necessary to go to Crimea or the Caucasus. It’s a huge country. There is a lot to see in other places.
Sergei Brilyov: Mr Medvedev, so we touched on the aviation industry after all. Let me look at it in a slightly different light. Charter flights to Egypt and Turkey have been completely cancelled. Of course, cutting down on flights will be a hard hit for the industry. And that’s not the only problem. Well, OK, when the Polet airline from Voronezh dropped out of the market, it was less noticeable than when Transaero, one of the major airlines, shut down. We are all frequent flyers here for professional reasons.
Dmitry Medvedev: And me as well.
Sergei Brilyov: We pay for tickets.
Dmitry Medvedev: This is a good question.
Sergei Brilyov: I mean of course, our employers cover the costs. Ticket prices are rising. What is the aviation industry supposed to do in these circumstances?
Dmitry Medvedev: This is of course a challenge for the industry. Airlines dropping out is not a good trend. Unfortunately, Transaero’s case is quite common: 300 billion roubles of debt. They just shouldn’t have run up such debt. It is a forecasting error that cost the company too much. Different government agencies now have to deal with this error so that it never happens again. At the same time, we will use the resources of Aeroflot and other airlines to service the flights previously operated by Transaero. All the operations run smoothly, like clockwork. People don’t even see the difference.
What you said about the fares is true though. Of course, whenever an airline leaves the market, it has an impact on competition. It is not our goal to make Aeroflot the only airline for domestic flights. Of course not. We obviously feel sorry for Transaero because it was an airline with years of experience that had flown so many flights. Let me remind you of the sad fate of some major airlines. For example, in the United States…
Sergei Brilyov: Yes, for example, Pan Am.
Dmitry Medvedev: Absolutely. They seemed so big, but now they are gone. All because they made forecasting errors or other mistakes. Therefore, the task is to maintain and stimulate the competition. We decided to reduce the VAT on air transport from 18% to 10%. This concession will remain in place to keep ticket fares reasonable. However, it is necessary to improve the competition in the industry. Why? Because the country is too big. If our country were small, we could have done without these support measures. Flying between Vladivostok and Moscow costs a lot of money, given the distance alone. We can’t make it shorter. There are also fuel costs. So, it is necessary to develop alternative routes, low-cost transport and discount systems for various destinations, which we have been doing in the past years. We will certainly continue working towards these goals.
Mikhail Fishman: If possible, I’d like to bring us back down to earth. You must know that truck drivers have been protesting for several weeks against the new Platon road tax system for using federal roads. At first glance, the issue is not worth bothering with; that is, the planned revenues from this new road tax are not worth the strikes, demonstrations and truck blockade. It is believed that a mistake has been made somewhere. The question is at which point? Was it made during the planning stage because the idea was essentially wrong, or in the implementation stage because we haven’t found the right words to explain this idea or have not implemented it properly? Or is it that our people, or more precisely truck drivers, are not ready to accept unpopular measures?
Dmitry Medvedev: Mikhail, to begin with, not all truck drivers are on strike, and 700,000 truck drivers have registered with the new tax system. They make up an overwhelming majority of long-haul truck drivers. But some drivers have not registered for different reasons. When we discussed this idea – these discussions began in 2011, by the way – it was clear that some deliveries are made by unregistered delivery companies and it’s no clear what they deliver.
Of course, nobody likes new payments. But as I said, the overwhelming majority of delivery companies, the large, respected companies that account for 85 to 90 percent of deliveries in the country, have registered with the new system. As a result, we can transfer between 40 and 50 billion roubles to road funds. This is a lot.
Second, we spend about 1 trillion roubles on roads every year, as Russia is a large country. But we need much more money. Where does this money come from? It mostly comes from car owners, while those whose vehicles have the most impact on roads, truck drivers, drivers of heavy-lift transport, pay very little. In all industrialised countries, truck drivers contribute to this spending, which is an absolutely normal and sound practice. I believe it should be brought to its logical conclusion in Russia.
As for the decisions we’ve made, they should have been scrutinised from a technical and economic view. Technologically, it’s impossible to launch a system before it starts working. All of those tests and pilot projects cannot be pronounced effective until we start collecting money. In other words, we probably made some mistakes and should have corrected them before launching the system. But these were not fatal mistakes; they have been corrected, and the system is functioning now. This is why 700,000 truck drivers have registered with it.
The other part of the issue concerns mentality. Truck drivers should get used to paying for driving on these roads, which is a normal thing as delivery charges are added to the price of commodities, and so delivery companies don’t suffer in the long run. Moreover, the new fee has been calculated based on this precept, but we’ve decided to cut it for the current period amid the problems its introduction has created. Overall, it is a negligible payment for the absolute majority of cargo delivered by trucks.
And the last thing we should have considered more carefully is fines, which were too high indeed. Acting upon the proposal of the Government, the State Duma and the Federation Council have reduced them. Therefore, I believe that the system has been adjusted and will bring the budget and all of us additional funds for the road sector. Only the lazy haven’t criticised our roads, but where can we find the money to repair them? It’s obvious that trucks have the biggest impact on roads, and so truck drivers should contribute to improving them. Everyone must learn to pay for these services. Unpopular measures are seldom welcome, but they eventually produce a beneficial economic effect.
Kirill Pozdnyakov: I have one more trivial question. The housing and utility fees will be raised by 4 percent next year. This shouldn’t be too much for consumers.
Dmitry Medvedev: No, it’s not much.
Kirill Pozdnyakov: That’s all right. On the other hand, according to experts, the quality of services in the industry will not improve and investments will not enter the sector. This means that ...
Dmitry Medvedev: We need to increase it even more?
Kirill Pozdnyakov: I don’t know, this is my question to you. That way, it turns out that consumers will pay more for nothing? Add to this payments for major house repairs, and so on.
Dmitry Medvedev: The utility bills will be lower than in 2015, as the rates will be reduced. The rates are tied to inflation and salary adjustments, including pension adjustments. Since we have made such adjustments part of our plan, we will increase the rate by only 4 percent. This did stir a variety of responses in the Government, but in the end we decided to increase the rate by only 4 percent. But this applies to private customers. Speaking about other entities that use housing and communal services, they, of course, pay more, and their rate is entirely different. I believe this is the best we can do. We can’t ask private consumers to pay more now.
Yelizaveta Osetinskaya: Mr Medvedev, I’m not sure if you are familiar with the high-profile investigation conducted by the Foundation for Fighting Corruption and Novaya Gazeta concerning the business conducted by Yury Chaika’s family members. I’d like to know what you think about it. However, I have something different in mind. Similar investigations show that the current system of income disclosure does not address the questions that society may have regarding officials’ income. Since you initiated the disclosure procedure, I want to ask you if this system should be expanded. Perhaps, adult children should be included in the income disclosure system, or something should be done to improve transparency?
Dmitry Medvedev: Indeed, I was involved in introducing the disclosure and civil servant accountability system. I believe it was the right thing to do back then, and this policy was continued in the following period. There are more individuals now who file disclosures and more information that they have to provide. We have introduced the conflict of interest construct and introduced bans on owning a number of property assets, including foreign accounts, foreign securities and foreign currency instruments. I believe it is absolutely normal, and this work must continue both in terms of improving legislation and accounting for what is going on. In this sense, we still have much to do.
We have ratified a series of international conventions, no matter what people may say. My opinion (in this case, not even as an official, but as a lawyer) is that we now have quite modern anti-corruption legislation. We didn’t have it as little as 10 years ago. This doesn’t mean that the situation with corruption has significantly changed however. This is really one of the greatest evils and a most significant problem of our society that involves government officials and others who are involved in corruption schemes, and the state must fight this…
With regard to investigations, they will always take place, but most importantly they must be based on objective data.
Yelizaveta Osetinskaya: Perhaps, the state should come up with an initiative and be proactive in this sphere?
Dmitry Medvedev: I believe we recently did a lot to implement such initiatives
Yelizaveta Osetinskaya: I’m talking about this particular story.
Dmitry Medvedev: With regard to this particular story, all specific cases must be addressed by those who are in charge of them. These are people who monitor the income of civil servants, as well as law enforcement agencies.
You said, let's go ahead and have officials include their adult children in their income disclosure filings. We can discuss this, but I'm not sure that this is consistent with modern approaches, because situations may differ. There might be situations where people stay in touch, but sometimes they don’t. We discussed this before — don’t think that it has just showed up on our radar. I remember five years ago we discussed where we should draw a line in the sand. Should we include minor children, as we do now, or should it apply to adult offspring as well? Seriously speaking, we shouldn’t be seeing a corrupt official in every high-ranking government employee. Parents and their children may not even talk to each other. Do we still have to shake things up to see what adult children of civil servants are up to, even if they don’t talk to each other and live in different countries? This may be difficult to accomplish technically, but we can look into this issue as well.
With regard to our overall work to improve anti-corruption legislation, it will continue undoubtedly. This is what the Government has repeatedly said in its resolutions, and this is what the President said in his address to the Federal Assembly.
Sergei Brilyov: Mr Medvedev, I meant to ask you then about the overall effort regarding the business climate, a point that the president brought up in his address, and simply consider the two issues together. Why does the president have to revisit it? After all, a lot has been said about lowering administrative barriers and reducing supervisory functions. There were reports to the effect that some supervisory agencies would be merged but they were not merged… Finally, there was the need to fine-tune the capital amnesty law again. In short, to sum everything up, why, even though the supreme ruling authority revisits the issue of the business climate again and again, from year to year, nothing much seems to be changing?
Dmitry Medvedev: Because our business climate is such that the authorities, the top authorities, have to revisit it. Because it is not changing the way that we would like it to, unfortunately. That’s why.
In fact, it is an extremely challenging issue. For various reasons – due to economic patterns and, let’s face it, due to the habits of a huge number of our people. This is not only the problem of officials, civil servants. After all, the business climate is created by everyone, including by business itself, and only recently business behaved in an absolutely, fundamentally different manner. Today everyone understands that it is important to improve the business climate. Why does the president speak about this? Why are we in the Government constantly talking about this? This is because we are moving forward. It would probably not be fair not to see this, because only recently, we were, say, in the 150th position in various rankings, which is sad, because by and large Russia is a developed country but our business climate was seen as very poor. Now we have made progress on an array of procedures. This is even somewhat surprising to me…
Sergei Brilyov: Are you referring to the Doing Business breakthrough, moving several dozen positions ahead?
Dmitry Medvedev: For example, we are among the top 10 countries in corporate registration terms. Listen, this is indeed a breakthrough. In overall rankings, we are somewhere on the 50th position. As a matter of fact – please note – we are ahead of all BRICS countries in these ratings (ratings are relative but still, they do reflect something). They are significantly larger and more steadily developing economies than we are. Even so, we have surpassed them, which means that our procedures are better in some respects. So when we talk about the need to improve the business climate we mean that we simply must be among the most advanced states. I am sure that we’ll make it. To this end, it is necessary to improve the legal framework, procedures and online verification systems.
I recently recalled (with my colleagues) the beginning of my legal practice. What did lawyers do in the 1990s? They registered companies. Each registration was an event. A company statute and a set of corporate documents had to be prepared; you had to haunt the doorsteps of many agencies, which cost a pretty penny, and lawyers, naturally, were eager to make money. Today the procedure is automatic. It’s an online, one-stop shop system. Isn’t this progress? I believe it’s very good progress. So we’ll continue this work without fail.
Mikhail Fishman: Mr Medvedev, I’d like, if I may, to revisit Lisa’s question, as I believe it’s important. Regarding the investigation into the Prosecutor General, members of his family and high-ranking officials at the Prosecutor General’s Office… You sort of brushed this aside, saying that the investigation should be objective. However, I’d like to understand how we are supposed to know that the investigation is objective. There should be some [official] response. What we see so far is that the authorities – in the broad sense of the word – are silent even though the reputation of the ruling authority is at stake. This does not even concern corruption. This is… In particular, high-ranking officials at the Prosecutor General’s Office have been accused of direct involvement in organised crime. The authorities should react. There should have been some transparent, open investigation. The Prosecutor General should have been suspended from office due to a conflict of interests. Otherwise, how are we supposed to understand whether or not this is true?
Dmitry Medvedev: Mikhail, you have just used a phrase – probably not consciously – that you shouldn’t be using now: you said that a government official has been charged with something. But if we are going to use these terms, we might go too far. As was the case in the 1930s. In our country, a person can only be prosecuted by the law enforcement system and only in the manner prescribed by law.
As for all kinds of media stories, you certainly know where they come from. You would agree that they are not always the result of an objective investigation, and do not always objectively reflect a person’s actions. These are often planted articles. I will not put any labels on any publications, because that would only give them publicity, which is exactly what they are trying to achieve. Moreover, such things are always politically motivated. But, of course, if you have information, law enforcement and supervisory authorities are obliged to analyse it and are required to take decisions, but only within the framework of existing procedures, not on the basis of emotion: "Wow, look who’s in the papers! Come on, let's put them all in concrete!" Investigations should be based on specific materials and a legal assessment of the case. Only this way can we establish the rule of law, unlike the system we, unfortunately, used for almost 80 years, when the presumption of innocence was thrown in the trash. I would ask you to keep this in mind when making such judgments.
Mikhail Fishman: I totally agree. There is public outcry, but zero response from the government ...
Dmitry Medvedev: Public responses are normal. But all this public attention should be followed by a legally verified reaction from the authorities – not an emotional, but a legally verified response. Not emotional. Legally verified. That's all there is to it.
Irada Zeynalova: But will that reaction come at all?
Dmitry Medvedev: Even if no one is saying anything, it does not mean there is no reaction. The response does not have to be instantaneous. With any case, the authorities – I mean the law enforcement agencies – are required to analyse a set of facts. I will not give any evaluations here precisely because I consider it unacceptable for the Prime Minister or any other top-ranking official to evaluate any law enforcement reasons or the circumstances of the case. By the way, I have always refrained from such judgements in any position I held. However, certain evaluations are always made, this is understandable.
Kirill Pozdnyakov: I have a certain philosophical question.
Dmitry Medvedev: I hope it’s not about money again?
Kirill Pozdnyakov: I’ll try and make it clear. They are declaring sanctions against Russia. We are saying: “Excellent, this will help us.”
Dmitry Medvedev: We are growing stronger.
Kirill Pozdnyakov: Yes. Down with the “bourgeois» goods, we’ll buy Russian-made goods instead. If they are telling us that travelling to the Turkish or Egyptian coasts is some kind of stereotype that has been imposed on us, this, too, is normal, and we’ll spend our vacations at home. Our country is big and wide. Are we really overestimating our values, or is this some unconscious striving for self-isolation?
Dmitry Medvedev: Yes, this is a very serious question. First, you and we have been buying “bourgeois” goods for a long time as Russia has a market-oriented economy based on private capital. We buy almost no goods from socialist countries, except those from North Korea.
Kirill Pozdnyakov: By saying, “bourgeois”, I mean imported goods.
Dmitry Medvedev: Imported goods are another story.Speaking of a striving for self-isolation and our desire to limit our consumption in some way, I believe that this is absolutely not true. No matter where we all work, we are all modern people. Let’s imagine that the Soviet Union survived to this day. It would be impossible to imagine, even for a minute, that it would remain outside current worldwide trends, globalisation trends and an open information agenda.
Even in Soviet times, our country was not a completely enclosed society — not to mention contemporary life. Therefore, any statement regarding Russia’s self-isolation is beyond the point. We are not facing such a prospect, and we are not gloating over the decisions that we made. Certainly, the people of Russia have no inner desire to completely fence themselves off, to preserve a patriarchal way of life and to say, “When in Russia, do as Russians,” that we will sort out things here by ourselves, and that we don’t need Western and other foreign goods.
Peter the Great established a window to Europe, and this window has not closed to this day. But this doesn’t mean that we should obtain all sorts of trash from there. Naturally, we should be guided by our own interests, national interests and by our own pragmatic stance. But we certainly do not face the prospect of isolation and a refusal to deal with foreign countries, and no one wants this to happen.
Yelizaveta Osetinskaya: Mr Medvedev, to continue this topic, I’d like to ask you…
Dmitry Medvedev: A philosophical topic?
Yelizaveta Osetinskaya: Not quite. We talked at length about our turn to the East, but judging from available information, this turn did not materialise in anything specific. Many framework agreements with China have been signed but it is not fully clear what they are all about.
Dmitry Medvedev: I can answer this question at length but we don’t have the time. Why is it unclear what they are all about? As for China, Power of Siberia is a contract on our gas supplies for dozens of billions of dollars. Our oil supplies to China are also worth dozens of billions of dollars, which we are receiving under current projects. These are already investments. Or take the Tianwan Nuclear Power Station. We’ve already built the first stage and are now working on the second. And these are just our major projects. Everything is OK there. I will go there next week to discuss investment with my Chinese colleagues.
Sergei Brilyov: Before announcing next steps in the activities of the Prime Minister, let me say that our time is indeed coming to an end.
Irada Zeinalova: Closing the circle I’d like to return to the start of our conversation. The year seemed fairly difficult. Sometimes it seemed as though we were encircled and it was difficult. It would be very good to see the light at the end of the tunnel. Maybe you could say something optimistic for next year since the outgoing year has already done its bit unless you have other comments.
Dmitry Medvedev: Irada, shall I give you a brief answer? Everything will be fine! I’d like to convey to you and all our television viewers my heartfelt greetings on the New Year, which is approaching. I wish everyone a wonderful mood and peaceful skies. I hope all of you celebrate its advent well. Our New Year holidays are long and everyone should make good use of them.
As for difficulties… Some will remain but there is no doubt that we will eventually overcome them. I wish you good programmes on the air and good publications in the press.
Irada Zeinalova: And we wish you good budgets.
Dmitry Medvedev:It is, of course, important for us to receive budget funds as it will make it easier to resolve our tasks, but have no doubt – we’ll do everything.
As for the outgoing year, it had many events – both sad and inspiring. There were some very positive moments, such as the celebrations of the 70th Victory anniversary. This is our common holiday and we had a real feast.
There were very grave events, too. Terrorism has again raised its head throughout the world. We will fight against it. I think that on the whole we passed this year well. The New Year will bring new events. Thank you for your regular programmes with my participation.
Sergei Brilyov: Mr Medvedev, thank you very much.